Shipping delays pinchPeloton's share price

Shares of Peloton Interactive Inc. slipped on Friday after it projected strong demand for its exercise bikes, treadmills and online workouts, but said its popularity has led to delivery delays, long waits for customer service and increasing costs to fix its supply chain.

The exercise company has been one of the biggest beneficiaries of the COVID-19 pandemic. Widespread shelter-in-place orders have kept people away from gyms and spurred purchases of Peloton's at-home fitness products and services.

Shares fell about one per cent on Friday after dropping about seven per cent in extended trading on Thursday after its results were released. The stock has jumped more than fourfold this year, closing Friday at US$125.46 in New York.

The boom has had its drawbacks. Peloton has been plagued by shortages and shipping delays for its products. Some customers are experiencing “unacceptably long wait times, well beyond our expectations, to reach our sales and support teams,” the company said Thursday in a statement.

Chief executive John Foley pledged to fix the issues, saying the company is spending money to improve shipping, including on faster air service, and will more clearly label delivery wait times for products on its website. The company is also expanding the customer service team, he said on a conference call after Peloton released its results.

The shipping expenses and effort to improve its supply chain will crimp gross margins in the current quarter, executives said on the call. Demand for its new Bike+ is exceeding expectations, but the company is unlikely to reach its goal of two-week delivery until next quarter, executives said.

Peloton projected revenue of US$1 billion in the period ending in December. That compares with analysts' average estimate of US$932.2 million, according to data compiled by Bloomberg. Peloton also raised its annual sales forecast to US$3.9 billion from as much as US$3.65 billion previously.

Revenue more than tripled to US$757.9 million in the fiscal first quarter from a year earlier, Peloton said. Analysts projected US$734.5 million. Profit, excluding certain items, was 20 cents a share, beating estimates of 13 cents.

The company also said connected fitness subscriptions more than doubled to 1.33 million, in line with Wall Street estimates. Peloton said it expects these subscribers to grow to 1.63 million in the fiscal second quarter. Analysts estimated 1.61 million. Connected fitness subscribers are consumers who subscribe through a Peloton device, rather than an app.

Peloton added that workouts grew 306 per cent to 77.8 million in the quarter, an average of almost 21 workouts per month per subscriber.